For the longest time, people have been turning to credit unions and banks to save money, take out personal loans, or buy a house. While these two offer similar services to customers, these two are still different in terms of their mission and the rates of interest they charge on loan products and savings.
Some people may find credit unions as the better option of the two while for others, they prefer banks all the way. Before choosing between these two, make sure you are familiar with the differences of these two and how to choose the best one for you.
Differences between Credit Unions and Banks
- Traditional Banks
Traditional banks are for-profit financial institutions with a license from the government to make loans and receive deposits. Banks also provide other services such as wealth management, retirement planning, and online planning. Traditional banks are different from online banks due to their physical presence aside from an online presence.
- Online Banks
Online banks don’t have a physical presence, resulting to lower costs of operation. These lower costs are then passed on to their clients in the form of savings accounts with higher interest rates. Internet-based banks work with ATM network operators to offer ATM access to customers. They also have lower fees charged compared to credit unions and traditional banks.
- Credit Unions
Credit unions are non-profit organizations that are made mainly to offer their members with banking services. Acting like banks, credit unions are member-owned with profits shared among all members.
Benefits of Credit Unions
- Better interest rates
- Member-owned non-profits
- Lower fees
Benefits of Banks
- More technology
- More branches and ATMs
- More brand awareness among customers
- Open to more customers
- Lower fees with online banks
How to Pick between Banks and Credit Unions?
For those banking customers who like the feel of being part of a community and care about interest rates alone, a credit union will appeal more to them than banks. Credit unions are found to be very customer-centric and somewhat more community-minded.
Millennials that are just getting started with the offered services of credit unions will meet majority of their needs at cheaper rates most of the time. However, if your financial picture is a little bit more complex, you plan to start a business soon, or you want access to exceptional investment products, you might be better off with banks.
There is definitely enough room for credit unions and banks alike. All sizes and shapes of financial institutions offer consumers different benefits. For others, that will be online banks without branches but with great ATM plans and rates. For others, this will be a large national bank that has various checking products and thousands of branches. For still others, this will be a credit union with just one branch around the corner.
This means that at the end of the day, the choice of what to pick between banks and credit unions all depends on you.